Ben Walsh, of Syracuse's Department of Neighborhood and Business Development, explains why some city development projects get PILOTS and others don't

David Lassman / The Post-Standard ÂÂBEN WALSH,Âdeputy commissioner of Neighborhood and Business Development for the city of SyrÂ´acuse, stands on Bank Alley outside the Syracuse Trust Condominiums. In an essay, Walsh defends the cityâs use of tax incentives to spark downtown development. Â

By Ben Walsh 
City of Syracuse 

¦In recent months The Post-Standard has reported on a number of economic development projects in the city of Syracuse, such as the proposed Tops Market in Valley Plaza and the redevelopment of the historic Leavenworth and Kasson buildings on James Street into mixed-income apartments. While the news of these developments has generated significant excitement throughout the community, it has also put a spotlight on the use of tax exemptions, particularly property tax exemptions and payment-in-lieu-of tax (PILOT) agreements, to support these projects.

As the city’s deputy commissioner of Neighborhood and Business Development, as well as the executive director of the Syracuse Industrial Development Agency, I’d like to shed some light on the process by which the city and SIDA evaluate projects and determine what, if any, public benefits should be bestowed upon them.

Despite the signs of economic progress all around us, from the downtown renaissance clearly on display at the recent Downtown Living Tour to the veritable construction boom taking place on University Hill, the reality is the city of Syracuse is still considered a weak-market city. These conditions are manifested in real estate development projects, particularly in the urban core, with construction costs that often exceed the completed value of the property and rents that are insufficient to cover debt service.

While our community has been fortunate over the years in that we’ve been able to partially mitigate these economic conditions through innovative public-private partnerships and forward-thinking federal and state programs like the Syracuse Neighborhood Initiative and the Restore NY program, the recent financial crisis has served as a stark reminder of the tenuous financial position of both the private and public sectors.

With few resources left to bring to the table, property tax exemptions and PILOTs are perhaps the most valuable, and last remaining, tools in the economic development toolbox of local governments and development agencies. More often than not, it is these exemptions that will provide a development project with the requisite degree of financial support necessary to enable it to move forward. As with any public benefit, however, it is important that property tax exemptions and PILOTs are explained in a strategic, consistent and transparent manner.

In the case of SIDA, which provides the legal mechanism for granting PILOTs, the agency is in the process of completely overhauling its uniform tax exemption policy for the first time in almost 15 years. Through the revised policy, developments in priority commercial corridors that create new jobs and incorporate valued principles like green technology, mixed use, historic preservation and the use of local labor will get priority, while projects that do not add significant value to the community will not receive incentives. The result will be a policy that better aligns with the community’s collective economic development priorities and provides developers and entrepreneurs with the guidance and predictability they need to invest and grow their business in the area.

The city also has made an effort recently to better align its benefits with regional economic development priorities. Over the past year and a half, the city has strengthened its existing local historic property tax exemption and adopted a new “mixed-use” exemption, which applies to properties that are converted from a strictly commercial use to a mix of residential and commercial uses. In both cases, the exemptions freeze existing property taxes at their current rate for a set number of years before phasing into a full assessment, based on the improvements made to the property. Eligible properties are entitled to these exemptions without a PILOT.

Equally as important as incentivizing the right type of development is the need to ensure the development is ultimately providing a net benefit to the community. To accomplish this, every project that comes through the doors of the city and SIDA is subject to a thorough financial analysis, commonly referred to as a “but-for” test. In other words, but-for the assistance provided, the project would not be financially feasible and thus not proceed. Since most PILOTs start with a payment equivalent to the taxes currently paid and increase with the enhanced value of the property, the “but-for” test not only provides for the generation of new taxes the community would not otherwise receive, it also ensures projects are not receiving excessive benefits at the taxpayers’ expense.

All economic development projects are not created equal, and under the leadership of Mayor Stephanie Miner and the SIDA board of directors, our team has gone to great lengths to develop sound policies for vetting and prioritizing projects throughout the city. Going forward, my office will continue to work in a collaborative manner with public and private stakeholders alike to develop a fair and equitable process by which property tax exemptions, PILOTs and all other public benefits are used to support critical economic development throughout our community. 

Ben Walsh serves as deputy commissioner of the City of Syracuse’s Department of Neighborhood and Business Development, as well as executive director of the Syracuse Industrial Development Agency. 
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PROJECTS, PAGE E-4 